Guide to buying a leasehold property

One of the most common ways of property purchase is a owning leasehold property. If you buying a property for the first time, it is important to seek help from mortgage brokers and advisors.

A skilled and experienced mortgage broker would scan the whole market and get you the best first-time buyer mortgage deals based on your requirements and circumstances.

If you are planning to own a leasehold property for the first time, here is a small yet informative guide to buying a leasehold property:

What is a leasehold property?

A leasehold property is a property were you owned the building but not the land of the building.

The landowner known as freeholder provide the ownership of the building on lease term.
Lease document is a detailed contract drawn out between the buyer and the freeholder about the period of the lease, details about property maintenance, and other relevant information about the communal areas.

How leasehold different from a freehold?

While a leasehold property only building is owned by the buyer not the land for a specific period, a freehold property includes the property and the land it stands on being owned by the buyer till they sell it.

Most of the flats are leasehold and most of the houses are freehold with very small number of leasehold houses.Any major work with leasehold property requires permission from freeholder.

What do you mean by a lease?

The lease plays the most important part in a leasehold property. It is the contract drawn out between the freeholder of the property and the buyer Generally, the lease has a detail of maintaining, insuring, and repairing the property and common parts according to the clauses mentioned in the lease.

In most cases, the leaseholder takes up the responsibility of keeping the property in good order, complying with the dos and don’ts specified by the owner in the lease, not subletting the property, refraining from making major structural changes, and making ongoing payments as mentioned by the freeholder.

All these details are mentioned in the lease to make the contract clear, objective, and transparent.

How important is lease term?

Generally, the lease terms are from 99 to 125 years. Income cases lease can extend to 999 years. Lease of up to 85 years is consider normal.
When it comes to getting a mortgage for buying a leasehold property, your mortgage lender may lend you money according to a “minimum unexpired lease term” for security purposes.

Make sure you meet these requirements as you look for mortgage to invest in a leasehold property.

Can you extend lease?

Yes, it is possible for leasehold property owners to extend their lease if they wish to own the property for a longer period.

If you have bought a leasehold property for on a lease and have held the lease at least for a period of two years, you legally have the right to extend your lease.

Share of freehold in a leasehold property

Many leasehold buyerschoose for having a share of freehold while buying the concerned leasehold property.

Here, along with the leasehold interest, the buyer purchases the owner’s interest in the freehold title as well.
In most cases, a specific company is set up for holding the freehold interest in the building where the concerned leasehold property is located.

Every leaseholder owning a property in this building will become a member of the concerned company when leasehold interest is purchased.
This arrangement provides leaseholders with greater control over the management of the leasehold properties owned by them.

It also makes it easier for the leasehold owners to make important decisions regarding the
extension of their leases and making relevant changes in the contract.